Is fiscal fatigue a threat to consolidation programmes?
Luca Agnello
Vitor Castro
Ricardo M. Sousa
2134/25014
https://repository.lboro.ac.uk/articles/journal_contribution/Is_fiscal_fatigue_a_threat_to_consolidation_programmes_/9493910
Building on a narrative approach to identify episodes of fiscal consolidation, data for a group of seventeen industrial countries over the period 1978–2009, and continuous-time duration models, we find evidence suggesting that the likelihood of a fiscal consolidation ending increases over time, but only for programmes that last fewer than six years. Additionally, fiscal consolidations tend to last longer in non-European than in European countries. Our results emphasize that chronic fiscal imbalances might lead to a vicious austerity cycle, while discipline in the behaviour of fiscal authorities is a means of achieving credible and shorter adjustment measures. Therefore, fiscal fatigue is likely to compromise the implementation and successfulness of fiscal consolidation programmes.
2017-05-17 09:11:06
Fiscal consolidation
Duration analysis
Weibull model
Duration dependence
Change points
Economics not elsewhere classified